The 22-year-old was linked with a number of clubs throughout Europe, including West Ham, Fulham, Norwich, Tottenham and Reading.
French side Sochaux and Italian side Genoa have also been linked with the Azerbaijan-born winger.
Hamad will officially join Hoffenheim in January.
“Hamad is a young, ambitious and still developing player who has shown his qualities in Sweden,” said Hoffenheim sports director Alexander Rosen.
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Liverpool have unveiled their new home kit for next season, sticking with the hugely popular retro styling of the current shirt.
The reputation of the Premier League means it is the most popular and one of the most watched leagues in the world.